Oil Prices Follow Economic Forecasts Lower
January 22 2019 - 5:56AM
Dow Jones News
By Christopher Alessi
-- Oil prices fell Tuesday on the back of fresh signs of slowing
global economic growth.
-- Brent crude, the global oil benchmark, was trading down 1.3%
at $61.92 a barrel on London's Intercontinental Exchange.
-- West Texas Intermediate futures, the U.S. oil standard, the
was down 1.3% at $53.35 a barrel on the New York Mercantile
Exchange.
HIGHLIGHTS
Macro-Economics: The International Monetary Fund on Monday cut
its forecast for world economic growth in 2019 to 3.5%, compared
with 3.7% in October. The fund's managing director, Christine
Lagarde, warned the "risk of a sharper decline in global growth has
certainly increased."
Ms. Lagarde's comments at the World Economic Forum in Davos,
Switzerland came as China -- the world's second-largest economy and
biggest importer of crude -- reported economic growth had slowed to
its lowest rate in nearly three decades, at 6.6% in 2018.
"Whether it is the renewed focus on China's issues, the cautious
voices out of Davos, with the IMF recently having downgraded its
global 2019 GDP forecast to a three year low of 3.5%, the
complicated Brexit process or the general flow over the last few
days of bearish analyst pieces on the equity side of things, there
are clearly enough reasons to not get carried away by the latest
[oil] rally," analysts at consulting firm JBC Energy wrote in a
note Tuesday.
Oil prices have climbed by more than 20% from annual lows hit
during the last week of 2018, closing up Friday at an eight-week
high. But the oil rally began to take a breather Monday following
the release of the Chinese growth data, falling in tandem with
global equities.
INSIGHT
OPEC+: Oil prices have overall been bolstered during the first
month of the year by the implementation of production curbs by the
Organization of the Petroleum Exporting Countries and its allies
outside the cartel. OPEC and 10 partner producers, led by Russia,
agreed in early December to collectively hold back crude output by
1.2 million barrels a day for the first six months of 2019. The
move was part of an effort to rein in a burgeoning supply glut and
boost prices, which had plunged by around 40% in the fourth quarter
of last year.
OPEC's commitment to the cuts was given more credibility last
week after the International Energy Agency reported that the
cartel's output came down by 590,000 barrels a day just last month
-- driven largely by the organization's de facto leader, Saudi
Arabia.
However, Russian crude and condensate production climbed by
80,000 barrels a day last month to a record high, the agency said
in its monthly oil market report.
Russia and Saudi Arabia are the world's two largest oil
producers behind the U.S., which took the top spot over the past
year as a result of relentless shale-oil growth.
-- The U.S. Energy Information Administration is set to release
its monthly drilling productivity report today.
-- The American Petroleum Institute, an industry group, releases
weekly data on U.S. oil inventories Wednesday, followed by official
government data from the EIA on Thursday.
Write to Christopher Alessi at christopher.alessi@wsj.com
(END) Dow Jones Newswires
January 22, 2019 05:41 ET (10:41 GMT)
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